Brendan Kenneally (Fianna Fail)
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I am glad to have an opportunity to discuss the Estimates. Senator McDowell said he did not understand the word "prudence". It is obvious that his party does not understand the word because it was anything but prudent when it was in government——

Michael Finucane (Fine Gael)
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Spare us the history lesson.

Brendan Kenneally (Fianna Fail)
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One wonders what state we would be in now if the Labour Party had anything to do with our economy. With regard to the number of gardaí, at the end of 2006 they will number 14,000 between those who are fully attested and those in training.

It surprises me a little that the Estimates do not get more attention from the media and elsewhere. There are three arms to the financial debate each year — the Estimates, which we are debating today, the budget and the subsequent Finance Bill. Most of the spending is dealt with in the Estimates. The budget is probably the sexy aspect to the debate, as it were, on which everybody seems to focus. However, this debate is important and should get more attention.

We were able to spend a great deal of money and develop programmes in so many areas because of prudent management of our finances over the years. In the mid-1970s, the debt to GDP ratio was 130%. In 1997, it was down to 65% and at the end of 2006 it will be down to 29%. That is a remarkable performance and it was achieved despite the fact that large amounts were paid out on the various tribunals, deafness claims, awards to haemophiliacs, claims by those abused as children in our State institutions and the nursing home charges problem.

Despite all those payouts, however, we remain in a strong economic position and that is welcome because there is a time-bomb on the horizon regarding future pensions for our elderly population. That is something the Minister's predecessor, former Deputy Charlie McCreevy, recognised some years ago and took steps to try to correct with a view to providing funding for the future. We know people are living longer and there will be more pressure in the future to fund this area. That is why we must keep a rein on expenditure and ensure the economy continues to grow. I believe we must look after the elderly members of our population. The Government has done that successfully in the past few years but I would welcome meaningful increases, as happened in a few previous budgets, in the level of payment to the elderly.

I would also welcome an increase in the fuel allowance, although there are two sides to that argument. The fuel allowance was introduced initially to cover the cost of a bag of coal but Members will be aware it does not cover that cost. I did not realise until I spoke to the Minister that there are now 240,000 recipients of the fuel allowance. It was initially intended to be a fairly focused scheme but it has continued to develop into other areas and to increase it by even €1 would be horrendously expensive. Is it better to give people on social welfare money through the fuel allowance or by direct payment and allow them decide how to spend it? I do not know but would welcome a meaningful increase in the allowances our elderly are getting.

The 2006 budget for the Department of Social and Family Affairs is roughly double what it was in 1999, despite the huge decrease in the number of people drawing unemployment assistance or benefit. If we can take that many people out of the social welfare net and still be in a position to double what we were paying them in 1999, it is obvious we are looking after those within the social welfare area. A total of 992,000 currently avail of weekly social welfare payments.

Turning to my own area of responsibility in the Seanad, namely, communications, marine and natural resources, a total of €547 million will be provided in 2006 in respect of this Department, which represents an 8% increase over 2005. The allocation provides for a wide range of services including marine safety, the operations of the Irish Coast Guard, sea ports development, coastal protection, marine research, seafood and aquaculture development, energy conservation, inland fisheries, communications and broadcasting. The Department has a wide remit and I am delighted that part of the allocation is €21 million for fishery harbour infrastructure. I expect much of it will be spent in my constituency of Dunmore East, where the final planing permission is due to come today from An Bord Pleanála for a major development in that harbour. I hope work will get under way in 2006 and look forward to having it completed the following year.

The roll-out of broadband is giving me some cause for concern. Many OECD reports have shown Ireland to be lagging behind in that area, despite the fact that the Government has been putting money into it and will provide another €36 million this year. The commitment to having broadband rolled out to every town with a population of over 1,500 by the year 2997 stands but problems remain. There is a geographical divide and demand is worryingly stagnant. The geographical divide exists because the last 10% of the lines are not being improved by Eircom, which makes it impossible for those people to take up broadband.

There are concerns about the demand and perhaps we might have to prime that to some extent. Even in those areas where platform and carrier competition exists, and as a result prices have become relatively competitive, the take-up is still depressingly slow. I do not know the reason for that but we must examine the question of driving demand and monitor the reason people are not taking it up. Prices in many areas have come down and it has become much more competitive. Speeds have increased as well. That defines the service and helps to influence demand. Pending local loop unbundling, alternative DSL providers are locked out. Speed competition, therefore, depends on wireless and cable and putting it up to Eircom. That is a far from ideal scenario.

Turning to the seafood sector, a quality seafood manager is proposed in the Sea Fisheries (Maritime Jurisdiction) Bill 2005, which is being debated in the other House today. I do not intend to go into the Bill because this is not the day for discussion of it. However, it is something about which I have grave reservations and I am sure we will get an opportunity to ventilate our views in the next few weeks.

A total of €3 million is being provided in 2006 to deal with coastal erosion. I am aware there is a long-term programme in place to deal with it but it is not going far enough to deal with the existing problems. We could spend €3 million in my constituency of Waterford and it would not tackle all the problems. This area has not been given sufficient priority and it is a problem that is affecting many people in coastal areas. I would like to see it being examined further.

There is nothing provided in the Estimates, nor did I expect it, for a new university for the south east located in Waterford, on which there is total agreement in the south-east region and for which an application is about to be lodged with the Minister for Education and Science. That is an issue we will come back to on a regular basis. The south east is suffering because of the lack of that type of facility. It is a cause of concern in terms of future development of the area. Many people believe it is an affluent part of the country but we are suffering because of the lack of such a facility. I will return to that issue again.

I would have liked to raise many other issues but unfortunately my time is limited. I congratulate the Minister on the way he is managing our finances.

Feargal Quinn (Independent)
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I welcome the Minister and his contribution, which gives us confidence for the future and a great deal of pride in the success of the past ten to 15 years. I am fearful of being regarded as a Jonah if I express any criticism or concerns about the future. I am not. I travelled throughout the world this year and found myself being highly regarded as a citizen of a country that has set standards the rest of the world is admiring.

Rather than get immersed in the details of individual spending in the Estimates I want to use this opportunity to address some general issues I believe are of importance. My first point is that in the run-up to a general election, all Government pronouncements on the economy should be accompanied by what I call a health warning, similar to that on cigarette packets. Since the Government is unlikely to provide that warning, all its pre-election pronouncements must be taken with a pinch of salt.

I remember clearly what happened in the run-up to the last general election in 2002. For almost two years beforehand, it was clear to all disinterested observers that our economy had encountered severe problems. A decade of world prosperity had come to a sharp end. This was signalled most dramatically by the bursting of the dotcom bubble which had a knock-on effect in the collapse of the valuation of telecommunications companies, not only in Ireland but worldwide. We were suddenly presented with a radical change in the world environment in which we operate as part of the new global economy. This was compounded by the local impact of the foot and mouth disease crisis and the worrying increase in the rate of domestic inflation. The final element in this dangerous cocktail was the global economic slowdown that followed the events of 11 September 2001 in the United States.

The writing was clearly on the wall in the run-up to the last election. There were plenty of reasons that we should trim our sails to meet the changing wind and many ways in which we needed to prepare our economy for the new challenges ahead. The Government, however, ignored all those warnings in its focus on keeping the electorate satisfied until after voting had taken place. Instead of sounding a prudent warning of caution, the former Minister for Finance, Charlie McCreevy, advised people to "party on". Instead of trimming its sails, the Government abandoned all restraint. Exchequer spending ballooned in the months before the election, as did employment in the public sector.

I say all this not to rehash an old argument but to explain why we should be cautious now. We must look out carefully for warning signals because, on past experience, we cannot rely on the Government to do so. When we seek to forecast how people will behave, usually a good guide is how they behaved in the past. For this reason, I approach with great scepticism any Government assessment of how the economy is currently performing. In the debate on housing in this House yesterday, I drew attention to the misleading effect that statistics of economic growth can have if they are taken at face value without any attempt to look behind the gross figures to divine their deeper meaning.

The Government claims that while our economic growth is lower than it was in the Celtic tiger years, everything is fine because that growth is still far above the average in the EU as a whole. This simplistic approach, which is driven by electoral considerations, masks a different underlying reality, one that we must acknowledge and tackle. The figures show that growth today is radically different in nature to the growth fuelled during the Celtic tiger years. In the late 1990s, our growth was driven by the output of our manufacturing and services industries, and this was reflected in a corresponding growth in exports. This was healthy and sustainable growth.

In stark contrast, the growth we have now is far less healthy and sustainable. It is driven by two main factors, consumer spending and activity in the construction industry. Consumer spending is a bad horse to bet on unless it is underpinned by real added value. If we spend what we earn in the world economy, that is fine. However, if we go on spending while the amount we earn from the world economy is not growing at the same rate we will soon find we are driving very fast up a cul-de-sac. I referred to it yesterday as making one's living by taking in the washing from one's own home. The warnings in this area are the almost total absence of growth in the manufacturing sector and the virtual stagnancy of our exports. We ignore these warnings at our peril. The latest publication from the National Competitiveness Council bears out what I said yesterday in this regard.

Similarly, the part of our growth based on construction is unhealthy and unsustainable. We must build houses and infrastructure, but we also need the activities in the world economy that will pay for what we spend in those areas. Unless that balance is there, growth in construction is unhealthy. It is certainly unsustainable. Nobody believes we can go on building houses and ramping up our infrastructure at the present rate forever.

These are some of the warning signs but they are not the entire picture. In recent weeks, we have had disturbing indications about the fragile nature of some of the international activities so vital to our future prosperity. I refer to the practice, which has apparently grown up in the past several years, of using this country as a tax haven for royalties on intellectual property. Last week, there was a hostile editorial in The New York Times, drawing attention to this practice by some of the largest United States companies, including Microsoft and Google. These companies have put in place legal structures that take advantage of the fact that income from royalties on intellectual property developed in Ireland is totally free from taxation in this country. I am fully in favour of this idea. By funnelling most of their world royalty income through an Irish company, however, these multinationals completely avoid tax. This is an advantage that can add billions of dollars to their bottom line.

Understandably, the United States taxation authorities are not in favour of this. In the coming months and years, we can expect them to exert increasing energy in trying to stop this practice. They will, in particular, look closely at the argument that the intellectual property protected in this way was developed here. It is fine from their point of view if that is the case. The more closely they look, however, they will realise that in many cases this claim is largely a sham.

I have always been a great supporter of the IDA. In particular, I have supported its shift into internationally traded services. I have also supported its efforts to get multinationals to develop research and development facilities here. In the knowledge economy, that is the way to go. However, we must build our progress in this area on a sound foundation, not on the shifting sands of being regarded as a tax haven. We must set up genuine research and development facilities that will carry out real research, not ones that act as a cover for tax avoidance.

Our prosperity has been built on our low rates of corporate tax. Let us not be in any doubt that they have always been an important driver of our foreign direct investment. We must acknowledge that there will be changes in this regard in the future. We are already facing pressure on this issue from Europe. This comes, on the one hand, from member states that want to harmonise tax rates upwards. I congratulate the Minister on avoiding such a change thus far. On the other hand, there is pressure from new member states that are prepared to undercut our rates to attract mobile investment. It is not widely known that Cyprus, for example, already offers a 10% corporate tax rate.

As the economies of the new member states develop, it is highly unlikely that this country will end up with the lowest tax rate. These trends present us with major challenges we have not yet acknowledged, let alone developed a strategy with which to tackle them, other than a policy of denial and a refusal to even discuss the issue of harmonising corporate tax. Our traditional position is unsustainable in the long term. We must acknowledge this and face up to the consequences as soon as possible.

Meanwhile, in the other direction, a new threat has arrived on the scene from the direction of the United States. In how the United States authorities react to the loyalty schemes in operation here lies the risk that Ireland will become branded as an offshore tax haven. We have worked hard to avoid this branding in the past 30 years and the IDA and everyone else has been successful in doing so. However, by refusing to acknowledge this as a problem, the Government puts at risk all of the progress we have made over the past generation. It would be sad if the imminence of a general election were allowed to mask those looming realities from us. If we allow it to happen we can be sure we will pay for it dearly.

I am using this opportunity to speak about the Estimates, which others have done well today, in order to spell out and sound a reminder and warning that, unless we are very careful and watch what is happening in our economy, we could be in danger of masking the reality. I do not wish to sound as if I am a Jonah, someone crying wolf or a pessimist. I am an optimist but I am also a realist. I urge the Government to carefully consider the points I raised.

Liam Fitzgerald (Fianna Fail)
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Given his track record, it is surprising to hear Senator Quinn sounding many negative notes, on which I will comment in a few minutes. I welcome the fact that the Minister for Finance was here today and introduced these statements on the Estimates. I welcome the Minister of State at the Department of Education and Science, Deputy de Valera. It was remiss of me during a previous Adjournment debate when I was in a hurry not to refer to the Minister of State's significant political decision and I will take this opportunity to do so. This is all part and parcel of the way Cabinets and Governments do their business in terms of personnel.

I hope I am not embarrassing the Minister of State but I could not let the occasion go without referring to her decision. I hope it is not final but, as it appears to be, I wish to take this opportunity to pay her the warmest possible tribute I can for her contributions to previous Books of Estimates and budgets as an essential, innovative and creative part of Government and her contributions to the policy behind those finances. I wish her the very best for the future. Whatever decision she makes will be a wise one and I hope it gives her the same fulfilment politics did. I have used part of my speaking time and will move on.

One of Senator McDowell's fundamental points was that while the Government, as reflected in budgets and Estimates from 1997 to 2004, had a vision, and the finances of the country are by and large in order, a significant weakness is that the Government does not now seem to have a vision. I could not disagree more. As times change, matters evolve and circumstances develop, visions can and should be refined. They can sometimes divert for various reasons.

With the deepest respect to the Senator, the central vision of the Government is to use the resources, strengths and fruits of successful management of the economy for the benefit of the most vulnerable in our society. In these times, if one were to examine all caring Departments, one of the most fundamental targeted areas reflecting a coherent and consistent vision is that of the most disadvantaged and vulnerable. The latter covers a multitude, those who cannot stand up for themselves.

I thank Senator Quinn. The issues he referred to are extremely sensitive and I believe his pessimism about the short-term to long-term potential of the Irish economy in terms of its transition from manufacturing to services and construction is unfounded or not fully justified. The economy has a strong base which it did not have in the past. The type of vagaries and peaks and troughs that the construction industry was subject to in the past will not apply in future. I am not the font of wisdom in respect of supply and demand in the construction sector and building boom. We all accept that there has been an ongoing subliminal possibility of negative equity in the industry but we have the ingredients for a soft landing.

I understand what the Senator is saying in terms of intellectual capital and loopholes. We should proceed cautiously as, despite the write-off of multinationals by others, we have gained substantially from them, not alone in terms of the jobs they created directly but the spin-off indigenous industries that feed on them. Multinationals provide a good base from which we can work.

A political leader who is not a Member of the Oireachtas recently said that one of the biggest objectives is to home in on indigenous industries but no one is doing so. I reject this completely. Whether directly or indirectly, by promoting multinationals we enabled, facilitated and promoted the creation of homegrown industries. We did so through enabling local initiatives to feed on the multinationals and establish their own structures. The basis of this remains. I accept that, as the global economy takes over and multinationals leave our shores for lower cost bases, such as the Far East, we are at risk of indigenous industries contemporaneously dying. Nevertheless, the basis of a renewal of homegrown industries exists and, with all due deference to his managerial and entrepreneurial experience, I would not be as pessimistic as Senator Quinn.

I never have a chance to speak about education. The value of the fruits of any good Government's economic policies is its ability to transfer those fruits. Just as it is transferring them on an ongoing basis to develop the economy, it is transferring them to increase the capacity and potential of the economy to perform better in successive years.

The second core fundamental is the Government's ability to target those resources as they increasingly become available, not only to public services in terms of quantity, quality and infrastructure, but to ensure that the voiceless among us receive the loudest and strongest response.

Rory Kiely (Fianna Fail)
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The Senator has exceeded his time.

Liam Fitzgerald (Fianna Fail)
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I apologise.

Michael Finucane (Fine Gael)
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I welcome the Minister of State at the Department of the Environment, Heritage and Local Government, Deputy Batt O'Keeffe, and compliment Senator Quinn on his thoughtful contribution. Unlike many of us and the party in power on the other side, which might focus on particular aspects, he would examine this matter much more objectively. Everyone recognises that the economy is going well but people are seriously questioning its management. If the Government was to be criticised, it would be on its management of the economy.

This issue has often been raised in respect of excessive overruns in the cost of certain projects. People are tired of hearing about electronic voting, the €50 million spent on it and €2.5 million per year spent on retaining the machines. The PPARS project cost in excess of €160 million before people said "Stop".

The digital hub project of 2000 was one of the Taoiseach's favoured projects. We shouted "Stop" in 2005 because the Massachusetts Institute of Technology seemed to renege on the financial aspect of the project. I could mention other excesses. The fundamental flaw is that many of these projects are publically funded. The difference between private sector industry and Government circles is that if something is not viable or is losing money, the private sector will make a decision to cut at that stage. In many cases due to a lack of overseeing ability, projects in the public service limp on and haemorrhage money over time before somebody decides to take action.

Rory Kiely (Fianna Fail)
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Senator White, I would prefer if you would not read what is on your phone. I apologise to Senator Finucane for the interruption.

Michael Finucane (Fine Gael)
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Much thought was given to consultants' advice regarding these projects. The Government said it was taking action to ensure that in future this aspect was covered. It is surprising to note that €60 million is to be spent next year on consultants, which is an increase of €1.5 million and this is on top of €50 million expended in recent times on a health board project which was signed for at the end of last April. I often wonder why Departments do not expend sufficient energy in producing reports rather than hiring outside consultants. I will repeat what I said many years ago that it is the easiest thing in the world to employ a consultant but in many cases the expertise exists within the Civil Service. I am sure the Department of Finance has many professional staff who could undertake that work.

Senator Quinn's remarks are quite valid. The building industry accounts for 40% of the total jobs available in this country. A total of 30,000 jobs have been lost in industry over the past three years. A significant number of extra jobs have been created in the services, including the hospitality, education and health sectors. The building industry can be a fickle business and in many cases it is supported by capital mechanisms from Government in order to sustain it. However, it may not be sustainable in the future and the loss of manufacturing jobs is damaging to the economy. The last overseas industry I remember coming to west Limerick was a manufacturer of bicycle helmets who came in 1991 and is now gone. This situation has parallels all over the country. Ireland is not attracting overseas industries and this may be a question of our competitiveness. This, plus the fickle nature of the construction industry could be a recipe for financial difficulties in the future and a lack of buoyancy in jobs.

The Minister of State will be familiar with the situation regarding local authorities, which is very wrong. In 1983, 63% of all local government funding came from the central Exchequer and this has dropped to a current figure of approximately 42%. The local authorities have expanded considerably in the intervening period. They have taken on many extra duties. Ratepayers will always be the soft touch when it comes to the preparation of estimates by local authorities. A total of 25% of the financing of local authorities comes from the rate payers who find it very tiresome that when the local authorities come to balancing the books, due cognisance is not taken of the consumer price index. It is a question of by what percentage can the rates be increased. There has been a significant increase in the rates over time.

The actions of the local authorities can often reduce the amount of revenue received from rate payers. For instance, if a decision is made to paint double yellow lines outside business premises in Abbeyfeale and Newcastlewest, this reduces the income of those businesses. The business community is tiring of this policy. Not alone must they pay commercial rates but they must also pay water charges. The chambers of commerce published a document recently in which the increases in water charges and rates between 2000 and 2004 were analysed. The results were frightening with regard to the scale of the overall charges.

My party has referred to stealth taxes on many occasions and people are tired of such taxes. Electricity charges have increased by 40% over the past few years and there have been increases in gas and other charges. This is straining people's pockets.

One of the central planks of Government policy in 2002 was a promise that 80% of those on the higher tax rate of 42% would be paying tax at the lower rate by 2007. So far, 67% of those people are paying the lower tax rate. It may be the Government's objective to achieve those targets over the next two budgets.

In 2002, the then Minister for Finance, Charlie McCreevy, promised there would be 5,000 fewer people employed in the public service. I do not know whether Departments do some crystal ball gazing to see what numbers of staff they will need in the future in health, education and other areas such as the Garda Síochána. It is very difficult to reconcile this with the news that the public service currently has 14,000 extra staff. Those projections are not valid. They were used as a comfort zone in 2002 by the Government but it will not happen.

People are no longer prepared to be conned and duped. Many people have said to me recently that this Government has wasted a lot of money and they are right. The Celtic tiger has caused a quadrupling of revenue in four years. The Government has frittered it away over the past eight years and we are not getting a better public service. The Government stands indicted on this issue.

Mary White (Fianna Fail)
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I welcome the Minister of State and his departmental colleagues to the House. In answer to Senator Finucane, is the Government supposed to run the health service on a daily basis and micro-manage it? That is not the job of the Government. I do not know what he is talking about.

Michael Finucane (Fine Gael)
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I did not say anything about the health service.

Mary White (Fianna Fail)
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You said——

Rory Kiely (Fianna Fail)
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The Senator must address the Chair.

Mary White (Fianna Fail)
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I apologise.

Michael Finucane (Fine Gael)
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The Government is there to manage the economy.

Mary White (Fianna Fail)
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The Senator spoke about the waste of money. I do not know how he could say that. He also said the Government should be micro-managing organisations and that his region has had no foreign direct investment since 1991. As I have said before to the Senator and his colleagues from Waterford, why do they not put pressure on the IDA to get international investment to their counties?

Michael Finucane (Fine Gael)
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It is a waste of time.

Mary White (Fianna Fail)
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I drive around the country and see the lack of infrastructure in certain places. People always blame their local Deputy or Senator when their part of the country is not doing well.

I wish to address the topics of the cervical cancer screening programme, child care, pensions, manufacturing industries and the care of the elderly but I will first refer to Senator Quinn's remarks. There is much truth in what he said about the growth in employment. There is effectively no unemployment in Ireland at present. Seeing all the cranes in the skyline every day, the realisation that there has been a significant increase in jobs in the construction sector is a no-brainer. That is good for the moment but it will not help to sustain the economy in the long run.

The scare about the multinationals is perennial with governments. Each United States Administration always threatens pulling back and not allowing industry invest overseas, but it always seems to pass away. I hope the article in The New York Times last week will also fade away.

As I have stated previously, there is an urgent need for a debate on employment in the Seanad. Urgent measures are needed. We have spoken about the decline in certain industries around the country and the black spots. In fact, 30,000 manufacturing jobs have been lost over the past four years. It is Government's job, not to run the individual factories or micro-manage, but to ensure the overall infrastructure is correct. One of the areas is a major reinvestment programme.

What is Senator Brian Hayes at?

Michael Finucane (Fine Gael)
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Senator White agrees with me on that.

Rory Kiely (Fianna Fail)
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Senator White, please address the Chair.

Mary White (Fianna Fail)
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To help manufacturers survive, the Irish Exporters Association — my nominating body to the Seanad — is calling for a major reinvestment in automation equipment in order to overcome the rising labour, energy and administration costs of operating in Ireland. This can only be achieved by a major capital grant aid scheme, particularly for small and medium-sized enterprises. There is a need for such a scheme.